How will creditors be stopped from collecting when I file a Chapter 13 bankruptcy?

For individuals struggling with debts chapter 13 can be a way to get back on track. Chapter 13 is a legal way to get out of debt, pay creditors and keep the property such as homes and cars. People must follow a repayment plan approved by the U.S. Bankruptcy Courts. The plan requires them to pay creditors back payments through a bankruptcy trustee while keeping future payments current. Creditors are stopped from collecting money from judgments, foreclosing on homes and suing because of the legal protection in bankruptcy called an automatic stay. The automatic stay is what stops creditors from all debt collection activities. The stay begins once chapter 13 bankruptcy petitions are filed and remains until the cases are discharged or dismissed. Typically, chapter 13 bankruptcy cases are dismissed for non-payment.

Therefore, during the automatic stay, creditors must leave individuals alone. They can’t even call or send letters to discuss debts or demand payments. If creditors do, they will get in trouble with the U.S. Bankruptcy Courts. In fact, even when people stop making payments, they must petition the U.S. Bankruptcy Courts to lift the automatic stay instead of contacting individuals. If the motion to lift the automatic stay is granted, then creditors can start or continue lawsuits, foreclosures and garnishments.

Bankruptcy is always a complicated process. Therefore, individuals should talk with a bankruptcy lawyer before, during and after filing chapter 13 bankruptcy petitions. Bankruptcy lawyer typically guide their clients through the bankruptcy process.